Iran News ...


02/25/12

Iranian MPs Criticizes Government's Economic Policy After Iranian Currency Hit Hard

Source: Mehr News Agency, Tehran

Two economists who are running as MPs for the March 2 parliamentary election, have strongly criticized the government's economic record, particularly the sharp fluctuations in the currency markets. Ahmad Tavakoli and Elyas Naderan made their views known during a question and answer session late on Friday in Tehran.


According Mehr News Agency, rial is being traded at 19,100 for a dollar in (illegal) open market in Tehran. The official rate posted at currency exchange shops stands at 12,260 rials for a dollar. However, there is no trading being done at this rate.

Tavakoli blamed government mismanagement and inaction for the explosion of gold and foreign currency prices.

When asked about the relationship between the U.S.-led sanctions on Iran and foreign currency prices, Tavakoli said sanctions had had an "effect" on the economy but not to the extent that "we are made confused and disabled so that we raise our hands and surrender."

To prevent a flux of liquidity to the dollar market - and a concomitant run on the rial - the central bank finally decided to raise interest rates to encourage investors to deposit their money in banks.

Tavakoli said 18 days had passed between adopting the policy and it coming into force.

"Our question to the Majlis was why economic officials acted so late," Tavakoli pointed out.

Elyas Naderan also said sanctions had existed for years but it was mismanagement of monetary policy, including direct cash stipends, that caused the recent economic problems.

Naderan said the enemies had launched a psychological warfare campaign by announcing sanctions on the central bank but economic officials had acted improperly, making the situation worse.

He said people had turned to buying foreign currency in the past 30 years, but each time a solution had been found.

Tavkoli said the decision by the central bank to raise interest rates had had a positive "psychological effect" on the market but were not sustainable. He said government officials had wrongly thought the economic problems would be resolved by implementing an artificial dollar exchange rate.

Tavakoli argued that economic officials should resign in order to prevent a return of spikes in gold and foreign currency prices.

"I personally told the minister of economy, governor of the central bank and minister of commerce that if Mr. Ahmadinejad does not fire you, ... (it is better that) you yourselves resign."

When asked about his economic forecast for the next Iranian calendar year (begins March 20), he said, "When I fielded my candidacy for the ninth Majlis I was asked 'what are your plans?' and I answered, 'so long as this government is in power I have no plan'."

He went on to say that if he won the election, he "would bring the government into line."

He added that this is a government that does whatever it wishes and Majlis cannot do anything.

Naderan also said, "We are concerned about the consequences of this government's decisions."

Naderan said that, in line with the implementation of the subsidy reform plan, the government had promised to raise energy prices once in two years, but it recently announced that it plans to increase fuel prices and consequently distribute more cash stipends to the public.

He said these "decisions are greatly worrisome" they cause monetary liquidity and create more economic problems.

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